Feb

9

BHP’s haircut for local investors..

February 9, 2010 | Leave a Comment

BHP Billiton stands alone among the global miners in being able increase its dividend payment despite the damage done to its December half profit from the now waning impact of the global financial crisis.

But Australian shareholders will not be at the front of the line thanking the company for its generosity.

While the interim dividend has been increased 2.4 per cent from 41 US cents to 42 US cents, it has gone backwards in Australian dollar terms by more than 25 per cent due to the impact of the strong Australian dollar.

Just how far backwards is not yet known as unusually, BHP has yet to nominate the exchange rate that will apply to the payment when it is made on March 23. The rate that will apply will be nominated on March 5 which is also the record date for the payment after the stock goes ex-dividend on March 1.

But if yesterday’s exchange rate is used, the 42 US cents a share interim, which is fully franked, works out at 47.95 cents a share, down from the previous interim dividend that weighed in at 64.95 cents. The difference in local currency terms is some 26 per cent.

There were no apologies from BHP today for the haircut local shareholders will be taking on their dividends. It extolled the virtue of the group’s “progressive” dividend policy, another way of saying its intent is that dividends will always go onwards and upwards, albeit in the group’s “functional” currency – the battered US dollar.

BHP chief Marius Kloppers described the progressive dividend policy as close as investors can get to an annuity without any guarantees. He also softened the blow of the lower Australian currency payout by pointing to the 25 per cent annual compound growth rate in dividends since BHP got together with the London-based Billiton in 2002. But again, that’s all in US dollars.

Perhaps he should have just pointed to the sharemarket where BHP shares were trading strongly in response to the group’s better-than-expected December half profit of $US5.7 billion before exceptional items.

At midday the shares were trading 61 cents, or 1.5 per cent, higher at $40.46.

The market had been expecting about $US5.1 billion, with the difference explained by Mr Kloppers as being the difficulty analysts would have had in dealing with the impact of accountancy translations and finalisation of currency and exchange rate impacts.


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